Visa Inc Class A V

Visa and Mastercard: Resolution of Lawsuit Will Lower and Cap Credit Interchange

Visa and Mastercard announced a resolution to a long-standing antitrust lawsuit. As part of the agreement, the networks will slightly lower credit interchange fees and cap these fees at the current level for five years. It has been estimated that this agreement will result in $30 billion in interchange savings for merchants. We would note that the networks do not receive interchange fees, those are passed along to issuers, but there could be some indirect impacts. Still, we see this as a reasonable price to resolve the uncertainty of the lawsuit. We believe Visa and Mastercard’s unique competitive positions and their wide moats create legal and regulatory event risk, and while this announcement resolves this particular issue, this risk is ongoing. We will maintain our $260 and $451 fair value estimates for Visa and Mastercard, respectively, and see both stocks as about fairly valued at the moment.